If you borrow 300 million won, 990,000 won per month… Ultra-long mortgage loans paying off for 40 years

The government decided to launch an’ultra-long mortgage loan’ within 40 years of distribution within this year. Current mortgage loans can be borrowed for up to 30 years from Korea Housing Finance Corporation and up to 35 years from banks. As the maturity of new products is longer, the principal and interest paid each month are reduced. The government said, “It will help to lower the burden on the younger generation for my home.”

On the 14th, the Financial Services Commission announced on the 14th that it will introduce a’extreme long-term policy mortgage (mortgage)’ for young adults and newlyweds this year. It plans to sell from the second half of the year at the latest through the Housing Finance Corporation.

The 40-year mortgage loan was found to reduce monthly payments by up to 16% compared to the traditional mortgage,’Bogeumjari loan’. For example, if you borrow 300 million won with a bogeumjari loan at an annual interest rate of 2.5%, the monthly principal and interest repayment is 1,85363 won when the maturity is 30 years. When the maturity is 40 years, you can pay 980,335 won monthly. However, as the maturity increases, the total interest amount increases. The interest accrued at the maturity of 30 years is 126.73 million won, and the maturity of 40 years is 174.88 million won. In conclusion, monthly payments decrease by 16.5% and total interest increases by 37.9%.

For consumers, it is positive that the options for mortgage loans become more diverse. Which product is advantageous depends on the individual situation. If you don’t have a lot of income right away, reducing your monthly payment and paying off for a long time can be a way to increase the burden of getting your own home. If your earnings are good and stable, you may prefer to shorten maturities to reduce total interest. An official from the Financial Services Commission explained, “Due to the nature of mortgage loans, most users actually repay before expiration, such as moving in the middle or changing to a low interest rate even if they borrow for a long term.

The Financial Services Commission is planning to supply ultra-long-term mortgages to the youth and newlyweds first, and to expand the target in stages. The effective method of applying the application qualification is similar to the standard of the existing policy mortgage.

The Bogeumjari Loan must have a house price of 600 million won or less (KB market price or Korea Real Estate Agency price) and an annual income of 70 million won or less (if you are unmarried, only you and married couples are added). Newlyweds are entitled to an annual income of 85 million won and multi-child households with an annual income of less than 100 million won. Another policy mortgage, eligible loans, can only be applied for less than 900 million won. An official from the Financial Services Commission said, “It meets the basic policy mortgage requirements, and young adults or newlyweds will be able to use a 40-year mortgage.”

There have been steadily raising demands that the ultra-long mortgage loans, which are active in developed countries, should be introduced in Korea. In the United States and Japan, there are also mortgages that are paid in 50 years.

The key is how stably the funds are raised. The Korea Housing Finance Corporation prints and sells mortgage securities (MBS) on the bond market, but the maturity of MBS is usually up to 20 years. It is the stage of issuing a 30-year product in small increments from October last year. An official from the Financial Services Commission said, “As soon as the preparations are complete, we will introduce an ultra-long-term mortgage as soon as possible so that many young people and newlyweds can benefit.”

Separately, the Financial Services Commission announced plans to expand the supply of’youth jeon and monthly rent’. The youth jeon and monthly rent loan is a product that lends up to 70 million won for deposit and 500,000 won for monthly rent to young people under the age of 34 at an early 2% interest rate. Since its launch in May 2019, it was used by 72,000 people until the end of last year.

Last year, the Financial Services Commission set the limit on the supply of monthly loans for young adults at 4.110 trillion won, but almost all of them have been exhausted. This year, the supply limit was completely abolished, and the guarantee fee, which is currently 0.05%, is decided to be reduced to 0.02%. It is considering increasing the per capita loan limit.

Reporter Lim Hyun-woo [email protected]